How Short-Term-Rentals Impact Your Neighborhood

By HOM Editor

Fast Fact: Short-term residential rentals are the best thing since sliced bread for folks who use them. But not everyone shares that view.

Travelers who use short-term residential rentals as an alternative to traditional hotels enjoy cost savings and “living like a local.” Property owners, or “hosts,” enjoy extra income generated by renting out a spare bedroom they’re not using anyway. In fact, countless hosts have come to count on this added income to help pay for repairs, their mortgage, and other costs of daily living — exactly the initial purpose of short-term rentals.

But in some communities, short-term rentals are exacerbating efforts to ensure housing is affordable for the folks who live locally — especially in regions where affordable homes for rent or purchase by actual long-term residents are already in short supply (for the most extreme examples, think New York City and San Francisco, but perhaps you’re seeing this in your own community as well).

Leaders in these communities say that’s because homes, that could be available for rent or sale to local residents, are instead being bought by investors and listed on short-term rental company websites (think, for example, Airbnb, VRBO, FlipKey, or HomeAway).

In fact, rental rates for long-term residents appear to be rising faster in neighborhoods where short-term rentals are most prevalent. And this trend is anticipated to grow, as more investors begin specifically seeking to buy homes they can rent out short-term. The cold hard fact is that an investor can make more money renting properties out by the day than by the month or year. This business model has grown so large that it’s now an industry influencer; Vacation home sales have jumped by over 50% in the past few years alone, in part due to the short-term rental phenomenon. And, since its founding in 2008, Airbnb, for example, has grown to over 2 million listings in 34,000 cities, and 190 countries!

This trend is now raising yet another concern. Critics are calling short- term rentals rogue hotels, because, unlike hotels, short-term rentals have virtually no oversight or accountability, potentially creating a public safety issue.

And, in some instances, folks who own or occupy homes nextdoor to short term rentals are not happy. They resent the constant strangers, noise, and other nuisances associated with living next door to a short-term renters who may not abide by the same common courtesies they apply in their own permanent residences.

As a result, short-term rentals have become a political hot potato in communities across the nation. Many fear that individual homeowner rights will be lost in the effort to prevent investors from buying up homes in an already tight inventory market. For example, in New Orleans’ French Quarter, where short-term rentals under 60 days are already prohibited, the law is seldom enforced, as property owners in New Orleans (and other cities) have been taking in lodgers long before the internet made it a global business.

So how will this issue resolve? Here’s what some communities are trying:

Some state and local governments are considering legislation that would prohibit advertising multiple short-term listings. Other proposals, for example, as in New York, limit the number of days a property can be rented each year, limit hosts to just one listing, require that hosts reside on-site during guest stays, or make it illegal to advertise a residential rental with three or more units for less than 30 days.

In Washington, D.C., where over 200,000 short-term rental guests stayed last year, hosts are required to buy licenses, and intermediaries are required to collect and remit taxes.

Virginia recently postponed new rules, which would’ve created the first statewide system to collect short-term rental taxes for local governments. But both local governments and hotels had concerns, such as apartment owners renting out units in entire buildings as short-term.

In Florida and Illinois, short-term rental guests pay state taxes, and Louisiana extended its 4% sale tax to include short-term rentals. Connecticut collects a 15% hotel tax. Almost 2,000 hosts in Connecticut rent out their homes, and over 50,000 guests have used them.

Both Arizona and Wisconsin are seeking to limit local restrictions on room rentals.

Austin, Texas, wants to prohibit short-term rentals for parties or concerts — also a problem in vacation spots like Beverly Hills and Fort Lauderdale.

Other cities, such as Portland, appear to welcome short-term rentals, getting in front of the issue by passing rules that required hosts to buy a permit, and, in turn, generating about $500,000 annually for the city.

One thing’s for sure, the future of short term rentals will impact many of us in one way or another.